Blog Post

Update: Time Warner Cable, Viacom Resolve Fee Dispute; How Much Does Web Access Matter?

Update: Back from the brink … I can report that TWC and Viacom (NYSE: VIA) have an agreement in principle and MTV Networks stays on TWC’s systems. (You can see the brief official statements after the jump.)

Original: Time Warner (NYSE: TWX) Cable CEO Glenn Britt and Viacom CEO Philippe Dauman are both standing by as negotiations continue in a fee dispute that could result in MTV Networks being pulled from TWC at midnight. As you might imagine, it’s all very he said-he said at this point: a TWC spokesman says the amount being sought by Viacom is a 15 percent increase, Viacom says 12 percent; TWC says it’s willing to grant a modest increase in keeping with the times, Viacom skips over that part; TWC says negotiating, Viacom says TWC unwilling to meet; TWC admits to a monthly $3 increase going into effect Jan. 1 in Los Angeles but says Viacom is wrong about similar increases in other markets; TWC calls the fee demand egregious, Viacom distributes an analyst report saying MTVN is undervalued; and so on.

More after the jump, including release

They also disagree on one other key aspect — well, key, as far as we’re concerned: the role web access should play. TWC spokesman Alex Dudley, who says the operator pays “hundreds of millions” already to carry MTVN, offered a comparison that didn’t work for me when we first started to talk this afternoon, suggesting free access to MTVN shows online was akin to paying $50 for sneakers in a store that you can get for free if you buy online. Not quite. But his real contention is one that TWC and other cable operators have been pushing since video went online: multiple access points makes content less valuable. “What we’re saying is, take the same content that you want us to pay $39 million more for next year and you want to give it online for free, what’s our incentive to pay for it?” He admits it’s not a major issue now but that as delivery methods merge and it becomes easier for the average person to get their favorite shows delivered via broadband to TV, “don’t you think that devalues the content to us? It’s one of the factors that has to be taken into account.”

Viacom spokesman Jeremy Zweig calls web access “a fundamentally weird argument for them to make” given that ratings are up for Comedy Central, home of readily available The Daily Show, for instance, while other networks with popular content streamed online also show no signs of damage. “They’ve called out streaming of Daily Show, Colbert and South Park as somehow being harmful to them. Fact is that Comedy Central just had its best television ratings month ever last month, and its best Q3 ever last quarter, and was the #1 basic cable network in prime for Men 18-24.”

TWC’s Dudley admits that may be the case but says that only measures subscribers — not the people shifting away or staying from TWC because they can get their video fix online. “That’s the revenue loss for us.” At the same time, though, TWC is making money from broadband subscribers who want fast speeds, in part so they can watch video online; the largest number get both video and data from the operator, which means that come tomorrow, if the shows are yanked from cable, some TWC subscribers will still be watching MTVN — and they could be doing it on fellow cable operator Comcast’s Fancast portal.

The people commenting on our earlier post about the dispute aren’t talking about switching to broadband for their viewing although some mention switching to satellite. That’s because the number of people for whom broadband-only video is a real lifestyle option is still relatively small. Yes, it’s doable but it takes a lot more thought and effort than paying that monthly bill and turning on the TV.

TIME WARNER CABLE, VIACOM REACH AGREEMENT IN PRINCIPLE
Networks Will Continue to Be Available On All Time Warner Cable (NYSE: TWC) Systems

New York, NY

4 Responses to “Update: Time Warner Cable, Viacom Resolve Fee Dispute; How Much Does Web Access Matter?”

  1. Shares of Time Warner cable, whose top markets include New York, Los Angeles, Dallas and Cleveland, closed at $21.45 Wednesday on the New York Stock Exchange, while those of Viacom closed at $19.06.

  2. digital bear

    Jeremy– Can you break it down by demographics? You may have record viewer ship but is it with the younger viewers or 30+ set? The larger trends seem to favor the internet viewing …

  3. Jeremy Zweig

    Staci – Alex Dudley is wrong. As I said in the email that you quoted, Comedy Central's *ratings* last month were their highest ever. More people are watching the network on television than any time in its history.

    The simple fact is that Comedy Central's ratings are at unprecedented levels, and people are shifting *towards* the channel on cable networks while also engaging on our streaming sites.